Cellular proliferation and differentiation are responses elicited by interaction of extracellular molecules with the cell surfaces of eukaryotic cells. In Dictyostelium extracellular cAMP acts similarly to paracrine hormones in mammalian cells by interacting with a specific cell surface receptor to stimulate the synthesis of intracellular second messages. Our results indicate that there are at least two independent mechanisms involved in the developmental regulation of gene expression by cAMP in Dictyostelium. Conditions which allow intracellular synthesis of cAMP promote the normal regulation of a gene known to be repressed in conjunction with cAMP signalling. In contrast, expression of genes which exhibit maximal activity after aggregate formation depends upon accumulation of extracellular cAMP signalling. We have additionally shown that extracellular cAMP can be at least partially bypassed in permeabilized cells exposed to inositol tris phosphate (IP3), a mobilizer of intracellular calcium ion; we suggest that IP3 acts as a second messenger in Dictyostelium to mediate certain developmental processes. Finally, we have provisionally isolated a gene for the cAMP cell surface receptor and have also cloned a gene which has homology with the Alpha subunit of the GTP-binding, N-regulatory protein and with the ras family of proto-oncogenes. Studies now focus on their expression and function in order to understand the molecular mechanisms of signal transduction.